THE MOLE

Bananas in Iceland

JANUARY 30, 2003

The Hotel Holt in Reykjavik is a rather pleasant place, full of Icelandic works of art. It features the best restaurant in Iceland. This is the venue each year for an annual meeting of what is known by the acronym NAMSAP. The Mole can never remember what it stands for but it is something like North Atlantic Motor Sport Advisory Panel. This clandestine affair is attended by The Mole and his closest advisors and their counterparts from the United States.

As a cover the meeting is usually billed as a convention of banana retailers.

This may seem rather odd but Iceland is a big banana producer thanks to volcanic activity which produces large amounts of natural hot water which the enterprising Icelanders decided to use to heat their greenhouses to tropical levels. The banana farms of Hveragerdi are very impressive.

The best thing about Iceland is that one can have secret meetings there because no-one ever goes there. And there are only 1.2 people per square mile so the chances of being spotted are minimal, even in the bar at the Hotel Holt.

The major topic of this year's NAMSAP conference was the potential merger between CART and Formula 1.

This may sound like a most unlikely scenario but The Mole's team and the Americans seemed to be in agreement that it is something that needs to be watched very closely in the months ahead. The Americans have been watching Gerald Forsythe closely since last October when he and CART chief executive Christopher Pook had a meeting in London with Bernie Ecclestone. No-one seemed to know what the meeting was about but word eventually leaked out that Ecclestone was considering buying into CART. Pook was asked if this was what had been discussed and said that there was "no formal discussions going on about our relationship with Formula 1".

The Mole pondered this for a moment and concluded that Pook meant that no-one at the meeting was wearing a tie and thus the talks were of an informal nature.

The Mole's network revealed soon afterwards that Ecclestone's legal and financial people later went over the CART books to see how the business operated. Four months later Forsythe has finally admitted that he went to Ecclestone, proposing a merger between Formula 1 and CART and presented Mr E with a 19-page document outlining the benefits of a partnership between the two series.

Gerald R Forsythe is a very impressive businessman and one should take his moves seriously. He rents and leases boilers and generators across the nation and nowadays builds power stations as well (or at least tells other people to build them). This means that he makes shocking amounts of money which has enabled the 62-year-old magnate from Terre Haute, Indiana, to enjoy himself. He had 290 acres of land at his home (known as Canyata) in Marshall, Illinois which he decided he would turn into a personal golf course.

There are some in America who reckon that he is actually wealthier than Ecclestone but is so smart that he does not even appear on the Forbes list of billionaires, while Mr E clocks in at $3.2bn. When he is not busy expanding his business or playing golf, Forsythe gets his kicks from running his own team in the CART Champ Car series. He has an interest in Formula 1 as well because he is the largest shareholder in a British Virgin Islands registered company called Mount Eagle Inc which owns 35% of British American Racing. In recent months he has been quietly buying up CART stock and he says quite openly that he would like to take CART off the stock exchange and back into private hands.

If you look carefully you will also find that Forsythe is also the principal owner of the Monterrey and Mexico City CART races and the man who owns the TV rights for CART in Mexico.

One might think that a CART-F1 merger will not work because the rules are so different but one should remember that CART is already committed to switching to normally-aspirated V10 engines in 2005.

At the same time Ecclestone is busy negotiating to buy back the Formula One group from the banks which acquired the business when Bavarian ex-billionaire Leo Kirch went bust last year. Ecclestone's desire is to revamp the business and then float it and make a pile more money. Ecclestone has shown in recent years that he does not mind partners so long as he has the power to make decisions and with CART struggling and F1 wanting to accelerate its penetration of the United States of America, one can imagine a situation in which the two get together. Control of CART would give Bernie a series which is similar to Formula 1 but without all the associated political problems, which make changing the rules virtually impossible. Because of its more restricted chassis regulations CART is very much cheaper than Formula 1 and offers car manufacturers a better chance of selling cars in North America, which is the target market of most of the big firms involved in the sport.

A mixture of CART and F1 events would work for both sides as Ecclestone has long-term deals with race tracks all over the world and CART has some good venues in the US, Canada and Mexico. CART's principal value is that it has American teams and sponsors although the drivers are rather thin on the ground with the only Americans being Jimmy Vasser and Ryan Hunter-Reay. There are however three Canadians and a whole bunch of Mexicans.

If a merged series was to appear it is hard to imagine why the FIA would have any problem with the continuation of the commercial rights deal and most of the F1 teams would happily join with the Americans.

In the circumstances the plans for the big manufacturers to do their own thing at huge expense and against the wishes of the FIA would make little sense because Ecclestone would be offering them the US market on a plate at a fraction of the cost of their own series. Bernie could organise for the teams to get a little bit more than the 23% of the revenues that teams currently receive.

Forsythe says that he still believes that an arrangement between the two championships would be very beneficial and that there are a lot of synergies and at some point would like to see that happen.

The Mole cannot help that Ecclestone might be thinking along similar lines, even if it sounds bananas.